2.7

Price elasticity of supply

Cambridge IGCSE Economics (0455)  · Unit 2: The allocation of resources  · 9 flashcards

Price elasticity of supply is topic 2.7 in the Cambridge IGCSE Economics (0455) syllabus , positioned in Unit 2 — The allocation of resources , alongside Microeconomics and macroeconomics, The role of markets and Demand.  In one line: PES measures the responsiveness of quantity supplied to a change in price. It is calculated as % change in quantity supplied / % change in price. A high PES indicates that firms can easily adjust production to price changes.

This topic is examined in Paper 1 (multiple-choice) and Paper 2 (structured questions, including data-response items).

The deck below contains 9 flashcards — 1 definition, 5 key concepts and 1 application card — covering the precise wording mark schemes reward.  Use the definition card to lock down command-word answers (define, state), then move on to the concept and application cards to handle explain, describe and compare questions.

Key definition

Price Elasticity of Supply (PES)

PES measures the responsiveness of quantity supplied to a change in price. It is calculated as % change in quantity supplied / % change in price. A high PES indicates that firms can easily adjust production to price changes.

Questions this Price elasticity of supply deck will help you answer

Definition Flip

Define Price Elasticity of Supply (PES).

Answer Flip

PES measures the responsiveness of quantity supplied to a change in price. It is calculated as % change in quantity supplied / % change in price. A high PES indicates that firms can easily adjust production to price changes.

Key Concept Flip

What does it mean for supply to be price elastic?

Answer Flip

Elastic supply means that the quantity supplied changes significantly in response to a change in price.

Example: if the price of a good increases by 10% and the quantity supplied increases by 20%, supply is elastic.
Key Concept Flip

What does it mean for supply to be price inelastic?

Answer Flip

Inelastic supply means that the quantity supplied changes only slightly in response to a change in price.

Example: agricultural goods often have inelastic supply in the short run as it takes time to grow more crops.
Key Concept Flip

Explain how 'time period' affects price elasticity of supply.

Answer Flip

In the short run, supply is often more inelastic because firms have limited time to adjust production. In the long run, supply tends to be more elastic as firms can invest in new capacity or enter/exit the market.

Key Concept Flip

Explain how the availability of 'stock' affects price elasticity of supply.

Answer Flip

If a firm has a large stock of finished goods, supply will be more elastic. They can respond quickly to a price increase by selling from existing inventory. Perishable items are difficult to stock, leading to inelastic supply.

Key Concept Flip

Explain how 'spare capacity' affects price elasticity of supply.

Answer Flip

Firms with spare capacity (unused resources) can increase output quickly when prices rise, resulting in a more elastic supply. A factory working at full capacity will struggle to quickly increase supply, making it more inelastic.

Key Concept Flip

How is PES calculated?

Answer Flip

Price Elasticity of Supply (PES) = (% Change in Quantity Supplied) / (% Change in Price). The result is a numerical value that indicates the degree of responsiveness.

Key Concept Flip

A company increases the price of its product by 5% and the quantity supplied increases by 15%. Calculate the PES.

Answer Flip

PES = 15% / 5% = 3. Since PES is greater than 1, supply is elastic.

Key Concept Flip

Discuss how the PES of agricultural products might differ in the short-run compared to the long-run.

Answer Flip

In the short-run, agricultural products tend to have inelastic supply due to the time it takes to grow crops/raise livestock. In the long-run, supply becomes more elastic as farmers can adjust planting decisions, invest in irrigation, or switch to different crops.

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2.6 Price elasticity of demand 2.8 Market economic system

Key Questions: Price elasticity of supply

Define Price Elasticity of Supply (PES).

PES measures the responsiveness of quantity supplied to a change in price. It is calculated as % change in quantity supplied / % change in price. A high PES indicates that firms can easily adjust production to price changes.

More topics in Unit 2 — The allocation of resources

Price elasticity of supply sits alongside these Economics decks in the same syllabus unit. Each uses the same spaced-repetition system, so progress in one informs the next.

2.1 Microeconomics and macroeconomics

9 flashcards
2.2 The role of markets

8 flashcards
2.3 Demand

9 flashcards
2.4 Supply

9 flashcards
2.5 Price determination

9 flashcards
2.6 Price elasticity of demand

10 flashcards
2.8 Market economic system

9 flashcards
2.9 Market failure

9 flashcards
2.10 Mixed economic system

10 flashcards

Cambridge syllabus keywords to use in your answers

These are the official Cambridge 0455 terms tagged to this section. Mark schemes credit responses that use the exact term — weave them into your answers verbatim rather than paraphrasing.

PES price elasticity of supply elastic supply inelastic supply time period stock spare capacity

Key terms covered in this Price elasticity of supply deck

Every term below is defined in the flashcards above. Use the list as a quick recall test before your exam — if you can't define one of these in your own words, flip back to that card.

Price Elasticity of Supply (PES)

How to study this Price elasticity of supply deck

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